Central Bank Estimates Bahamas National Debt At $2 Billion

by Amanda Banks, Tax-News.com, London

30 May 2002

In its Annual Report & Financial Statement of Accounts for the year ended December 2001, the Central Bank of the Bahamas revealed that the nation's national debt grew to around $2 billion last year, as a result of declining revenue collection and unforeseen events such as the September 11 attacks and Hurricane Michelle.

Following recent suggestions by the Central Bank's Governor, Julian Francis, that the Bahamian economy 'continues to mark time', the report revealed that tax collections in 2001 contracted by around $36.8 million, with the bulk of the decline concentrated in taxes on international trade and transactions (such as stamp duty and other taxes on financial transactions).

In view of this state of affairs, and the recent announcement by Prime Minister, Perry Christie, that the government will need to borrow an additional $125 million in order to service outstanding debts, the President of the Bahamas Chamber of Commerce has stressed that Progressive Liberal Party government has a unique challenge ahead of it.

Speaking to the Nassau Guardian on Monday, Raymond Winder observed that if the new government is to follow through on its pre-election fiscal policy promises of no income tax, no corporate tax, no capital gains tax, and no inheritance tax, and at the same time nurse the Bahamian economy back to full health, it must develop a strategy for generating more revenue.

One such strategy, according to Mr Winder, could be to reduce the Public Service sector, which currently stands at around 20,000 workers. The Chamber of Commerce chief told the newspaper that while he was not necessarily advocating reduced public services: 'If we do not reduce the Public Service sector, we may not have any choice but to look at those taxes as a means of generating revenue.'

Imposing new taxes would be disastrous for the international reputation of the Bahamas, according to Mr Winder, who explained to the Nassau Guardian on Monday that: 'If the Bahamas wants to remain competitive, and wants to continually attract the flow of investment into the Bahamas, it is imperative that our taxes are less than other industrialised countries.'

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